All asset classes are traded differently, dependent on the trader.
Traders approach markets with a variety of objectives, expectations and outcomes, and with the advent of cryptocurrencies, traders from across the globe are flocking to a relatively new asset class to ply their trade.
Whereas some prefer to invest, others speculate. While some focus on spotting the evolution of long-term trends, others focus on capitalizing on short-term opportunities. In the financial market jungle, traders and investors survey the terrain while armed with different tools; positing divergent objectives and setting disparate expectations.
As a famous novelist once said: “All’s fair in love and war”.
Despite varied methodologies and a kaleidoscope of possible strategies, all traders target the same outcome: profit. The approach to trading may differ, but the tools used to trade remain the same. With a mobile phone and a fistful of dollars, retail traders have set forth into the jungle of cryptocurrency trading in search of outlandish returns (at the potential expense of their entire investment).
When it comes to speculative trading in cryptocurrencies -- an asset class that has outstripped all others by total value add -- the same logic has applied since the inception of Bitcoin in 2008.
Thousands of cryptocurrencies have launched since the arrival of the Bitcoin bellwether, all available to own and trade with seamless fluidity and razor-thin fees -- fertile ground for scalpers and positional traders alike.
The ultimate result of persistently lower barriers to entry, lures of quickfire profits and some of the most frothy tradable products in human history, retail traders are chomping at the bit to get their maiden trading accounts up and running.
As with anything new and anything hot, opportunists are always there to maximize an opportunity. In crypto trading, four trader archetypes have emerged in an attempt to make a quick buck or two.
Possibly the most stereotypical trader in the crypto land is the Crypto Cowboy. Typically male, tech and market-savvy Crypto Cowboys tend to be hyper-focused on market events and aware of even the quietest of market rustlings on crypto market news websites.
Constantly optimal in their approach, Crypto Cowboys are always fine-tuning their strategies and rejigging their portfolios to best navigate a topsy-turvy market.
The Crypto Cowboy tends to sport a higher risk appetite compared to the average trader while being highly confident in their abilities to the point of being labelled “braggadocious”.
Crypto Cowboys also strive to maintain their ability to successfully navigate the market given their persistent quest for new information, while their quick response times to new developments aid the likelihood of opportunistic winning trades. In high spare capacity markets such as crypto, this often presents plentiful arbitrage opportunities for the Crypto Cowboy.
Implementing fanciful concepts such as “Word of Mouth” (WOM) protocols to gauge public sentiment, appealing to the pontifications of key opinion leaders while pouring over all relevant financial blogs regarding crypto development -- Crypto Cowboys feel the need to gauge the pulse of the market, as flamboyantly as possible.
Crypto Cowboys tend to find themselves looking for the “next angle” while honing their way to the prophesied “market edge” that grants the holy grail of everlasting profits. Trail-blazing concepts such as “tax harvesting” (a strategy in which you sell crypto held at a loss in order to lower your amount of reported capital gains) and micro-trading (buying and selling smaller crypto chunks) are all considered valid modus operandi, to be utilized for the ultimate purpose of personal enrichment. Everything counts and everything matters.
Favorite coins: Dogecoin, Shiba Inu and Floki Inu.
Aiming to implement tried and tested financial market principles used by stock traders for generations, Crypto Geeks are keen to infuse concepts such as cross-asset diversification into their crypto portfolios including assets from far-flung regions offering higher returns.
Diversifying one’s crypto exposure can be achieved by investing in a variety of cryptocurrencies as well as other assets.
Crypto Geeks are market-savvy and looking for the bigger picture, as opposed to isolated factoids. They want to win the war while not fretting over losing a few battles. Their various exposures can be up 20% one month and down 15% the next, but by spreading money around different cryptos, regions and assets, their overall portfolio returns are smoothed out.
Crypto Geeks tend to have diverse portfolios including commodities, real estate, fixed deposits and government bonds in order to hedge risk from potential liquidity and counterparty risk, as well as, severe declines in any one asset class.
The biggest barrier for Crypto Geeks is the lack of all-encompassing regulations for the crypto market to date and the spectre of draconian regulations being introduced to mitigate consumer losses -- thereby collaring the Crypto Geek’s burgeoning portfolio.
Favorite coins: Solana, Polkadot and Decentraland.
Guided by ethical and social values that transcend profit and loss, Crypto Angels seek to invest in ethical coins that support green technologies and promote sustainable development globally.
Their collective motto is: “It ain’t worth doing unless it’s done right,” in all possible contexts.
Crypto Angels are stoically-minded upon doing the right thing with regards to both their own, and others’, well-being. Concepts such as ethical investing, equality, environmental sustainability and social justice rank very highly in a Crypto Angel’s hierarchy of values -- and they’re not afraid to remind everyone around them about it (to garner support for their good causes, of course).
To demonstrate the kind of investment a socially-conscious crypto investor would consider (while trying to emulate Bitcoin’s giddy price appreciation since 2008) one can look at coins such as Cardano -- a coin that's trying to make Ethiopia a better place courtesy of blockchain-powered initiatives in collaboration with the Ethiopian government.
Environmental sustainability-focused coins such as Aquari and SolarCoin have, so far, failed to tickle the fancy of most crypto investors including Crypto Angels themselves, but that could be subject to change as the plight of the environment makes more headlines and entices more Crypto Angels to become part of the solution.
Socially conscious investors tend to make smaller cryptocurrency investments because they tend to be hesitant of persistent uncertainty and the possibility of malicious actors exploiting core crypto principles such as anonymity, reliability and decentralisation.
Favorite coins: Remain to be Discovered.
Typically veteran and seeking long-term “value” rather than being lured by the prospect of short-term profits, the Crypto Grandad investor wants to get their hands on widely-backed coins that will stand the test of time.
The core goal for most Crypto Grandads is to obtain long-term financial freedom through disciplined management and consistent investment in low-risk instruments. Given the inherent volatility in all cryptocurrencies, the Crypto Grandad’s prime focus is on the top 5 cryptocurrencies by market capitalization.
More broadly, conservative crypto investors are focused on perceivably safer coins with more existing investors and a stronger narrative supporting their activities. In the early years of crypto adoption, the entire cryptosphere was considered sacrilege by many conservative investors. Taking exposure to anything crypto-related was seen in the same light as investing in a pyramid Ponzi scheme.
In 2021 - 13 years since Bitcoin was first born - everything has changed. Institutional investors, whether it be individual HNWs or investment funds, are now flooding into the cryptosphere while regulators are rushing to keep up with market demand for more crypto projects.
The current status quo has created a fertile investment savannah, ideally suited for Crypto Grandads. With smart institutional money now taking a position in cryptocurrencies and even central banks musing about launching their own coins -- and market regulators bolstering their efforts to keep pace with crypto industry growth -- the financially-savvy Crypto Grandad who has been around the block more than once, knows one thing for sure: cryptocurrency as an asset class has now earned its seat at the top table and constitutes fertile ground for investors.
Favorite coins: Bitcoin, Ethereum and Litecoin.
So, which kind of crypto trader are you?